Seadrill sells Asian unit in deal worth $2.9 billion

OSLO Mon Nov 5, 2012 7:21pm IST

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OSLO (Reuters) - Seadrill (SDRL.OL), the world's biggest offshore rig group by market value, is to sell part of its Asian business to Malaysia's SapuraKencana (SKPE.KL) in a deal worth $2.9 billion, freeing up cash to expand in high-growth deep-water drilling.

The company, the crown jewel in billionaire John Fredriksen's empire, is selling its tender rigs division - rigs f o r drilling in waters up to 6,500 feet - to the Malaysian firm, which will get an established business with expertise to help its Asian expansion.

Fredriksen, known as "Big Wolf" for his bold business deals, has been the dominant player in the tender rig business and analysts said he is now cashing in at the top, before competition begins to eat into his market share.

He said Seadrill would use the proceeds from the deal to expand its deep-water fleet and also invest in the resurgent jack-up drilling sector - shallow-water rigs with legs that can be jacked up and down.

Deep-water exploration has become the main focus of the oil and gas exploration industry after big finds off Brazil, East Africa and Asia.

Deep-water rigs, which can work at depths up to 12,000 feet, are chartered for as much as $640,000 per day following rapid price inflation, well above rates of up to $135,000 for shallow-water tender rigs.

"They already made a big bet on deep-water drilling and with this deal, Seadrill shifts its focus more towards exploration rather than production," Danske Bank analysts Endre Storløkken said.

Analysts said Fredriksen, whose personal wealth has been estimated at $11.3 billion by Forbes magazine, had got a full price for the business.

"They are selling a division at a full price and there's a clear advantage of selling a business if you can achieve a full price," analyst Lukas Daul at SEB Enskilda said.

"It's been a fantastic run since they started and they pull out on top," Daul added.

Seadrill rival Transocean (RIG.N) has also been restructuring its offshore drilling fleet and announced plans in September to sell 38 older rigs to focus on more lucrative shallow-water units as well as rigs that work in water more than a mile deep.

The $2.9 billion price tag on Seadrill's deal includes up to $1.4 billion in cash, $363 million in capital expenditure, around $800 million in debt plus up to $350 million worth of new shares in SapuraKencana. Seadrill's stake in SapuraKancana will rise to 12.5 percent from 6.4 percent.

In addition, Seadrill will gain the right to nominate two SapuraKencana board members, with Fredriksen expected to be one of them.

At 1110 GMT, Seadrill shares were down 0.6 percent, in line with the broader market .OBX.

CIMB Investment Bank, Goldman Sachs and Maybank Investment Bank are advisors to SapuraKencana.

($1 = 5.8072 Danish crowns) (Reporting by Balazs Koranyi. Editing by Jane Merriman)

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